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No Winners Yet
Author: Ravi Prakash (info)
Website: http://www.optionstradinglessons.com/
Posted: March 3rd, 2008 at 9:50 am EST
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This Friday the Market did the opposite of the previous week. The DOW sank over 300 points. The usual suspects were responsible: weak GDP, sinking real estate, credit crunch, more write downs at financial institutions and rising commodity prices. I am sure you too are tired of reading and hearing the same old stuff for the past few months. When does this all end? I think it will end soon enough. The Stock Market has priced in the slow down and losses. It started this adjustment a few months ago and soon it will have to start pricing in the future. Earnings have been slashed in some cases over 50% for some financial firms. Even tech’s have not escaped this round of indiscriminate selling.
The thing about hindsight (besides being 20/20) is that it allows us to improve the way we read and understand chart signals. Currently the investment community is waiting for a sign that would signal a bottom in the Stock Market. What if the bottom is already in? We would only be able to recognize it later on when we look back at the charts. The NASDAQ on a 10 year chart shows support at the 2244 levels with the MACD showing weakness. The DOW still looks like it may dip to its 50 month MA around the 11,500 mark. The fight continues with no clear win for the bears or the bulls. The trading range for the major indices remain narrow and a break out to one side or the other is still waiting to happen. This past week looked like it might be the start of a move up. Well that move ran out of steam real fast.
This week the Fed chief hinted at lowering interest rates yet again in the near future. As I said before once down this path, they will continue down it for some time. We all know the consequences of these actions. We see it in the high commodity prices, higher inflation (CPI/PPI), weak US Dollar but better exports. The important economic numbers all point to a slow down that is already in progress and consumer confidence is low. However, I still see mixed signals, especially where I live; which is Northern Virginia. I do see real estate prices dropping, but I continue to see people doing well enough to spend. I have not heard directly or through friends of people being laid off from work. Grocery prices are high and indicate inflation is closer to the 12-15% levels vs. what is reported by the government. Yet I see the grocery stores packed with people shopping. I do not see anything resembling a recession in my area. So my conclusion is that some areas of the country will pull out of this slow down or recession without too much pain.
Now that many financial firms have closed their books for the latest quarter, we will see them reporting in the coming weeks. If they can show that they are solvent and report better than expected revenue and earnings, we may see the negative sentiment change.
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Authors, Indexes, Investing, Options, Ravi Prakash, Stock Market, Trading
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